Stressed transport layer and a technical chart pattern threaten more volatility for Solana token

Investors’ stablecoin positioning on the Solana network and a key technical chart pattern threaten more volatility for the Solana token

Investors' stablecoin positioning on the Solana network and a key technical chart pattern threaten more volatility for the Solana (SOL) token, which may see a decisive moment for its price action.

Solana's transport layer saw "extreme" volatility in trading Tether's USDt (USDT) stablecoin, which may indicate that traders are repositioning in search of new investment opportunities.

USDT trading on Solana's transport layer saw over 137% surge during the last week of February, after seeing a 61% plunge during the previous week, according to a report by global payments infrastructure platform Mercuryo, shared with Cointelegraph.

The stablecoin trading spikes show an unparalleled level of trading activity that may signal more volatility for the Solana (SOL) token, Petr Kozyakov, co-founder and CEO of Mercuryo, noted.

"This frenetic activity may also indicate that the chain is prone to be more volatile as it's switching between different assets and investors are quickly repositioning their capital," the CEO told Cointelegraph, adding: "Notably, DEX's on Solana, such as Jupiter and Raydium, have ignited significant interest as they process a vast number of transactions."

Solana price action

The world's leading cryptocurrency exchange Binance disclosed plans in March to launch a new, fully-fledged exchange in the Solana ecosystem.

The news comes as the Solana network is set to see a key moment for its price action, with a technical pattern emerging on the token's chart.

As the price of Solana approaches the crucial support level of $15, it's also forming an interesting technical pattern that could lead to a substantial move in either direction.

"Solana Heikin Ashi hourly chart shows a Converging Triangle. Both bullish or bearish moves are possible," pseudonymous crypto analyst Trader Tardigrade wrote in a March 19 X post.

Source: Trader Tardigrade

The converging triangle pattern occurs when the price minimums and maximums converge over time, forming a triangle shape on the chart.

Once the price breaks out of the triangle, it could move sharply in the direction of the breakout. In the case of Solana, a breakout above the triangle could lead to a rally to the next resistance level at $20, while a breakout below the triangle could lead to a decline to the next support level at $10.

The memecoin frenzy and FTX repayments

Some analysts suggest that the current memecoin frenzy has been siphoning liquidity from the Solana token, while other factors are also affecting SOL's price action.

According to Kozyakov, the incoming repayments from bankrupt FTX exchange may limit Solana's price action.

FTX and Alameda Research-linked wallets unstaked 431 million in SOL tokens on March 4, making it the biggest SOL token unlock since November 2023, Cointelegraph reported.

While FTX and Alameda unlocked over 400 million in USDt and SOL, the firms may not be able to sell all the tokens in a single transaction.

The Delaware Bankruptcy Court approved FTX's plan to sell digital assets, imposing strict limits on liquidation amounts.

As part of the ruling, the bankrupt exchange can sell digital assets weekly through an investment adviser, with an initial limit of 50 million in the first week and 100 million in subsequent weeks. If FTX seeks to sell more, it must request court approval to raise the limit to 200 million per week.

FTX's next round of repayments will take place on May 30. According to FTX's recovery plan, 98% of creditors are expected to receive at least 118% of their claim value in cash. In May 2024, the exchange estimated the distribution's total value to range between 14.5 billion and 16.3 billion.